Poor weather and flooding in Peru over recent months have affected a range of fruit crops including avocados. Speaking with Fresh Fruit Porta, Pacific Produce managing director Rob Cullum explains how the situation is leading to “exorbitant” prices in the U.K. and how the supply gap is likely to continue as the U.S. absorbs higher volumes from the South American country.

Peruvian avocado association ProHass has formally downgraded its crop forecast for 2017 and estimates could be pushed down further due to the impacts of the heavy rains and consequent flooding in January. 

Organization president, Daniel Bustamante, says the official estimate has been cut by 10,000 metric tons (MT) to 240,000MT, and over the course of weekly updates that figure could easily fall by another 20,000MT.

However, Cullum says the impact in terms of supply into the U.K. and Europe is not dramatically affected right now because fruit can remain on the tree, with volumes from Peru expected to pick up shortly.

However, he questions what will happen to the market once the U.S. import season really picks up pace in early to mid May.

“It doesn’t really make too much difference to the fruit itself because you can leave avocado on the tree, not indefinitely but not like some fruit where it has to be picked in the right moment,” he says.

“In most terms the fruit is still there, it’s going to come. There is no dramatic issue to the volume out of Peru, but the fruit is going to come slightly later so that’s left a bit of a gap in the market and has put prices to what we believe are exorbitant levels in the UK and also in Europe.

“We’re seeing that part of it is a reflection of volume not coming, but another part is a reflection on the fact that this is the first time that Peru comes back into the market post currency collapse.”

Cullum says that two aspects are compounding; short market plus poor currency.

“The third impact, which I don’t think people have properly understood yet, is the impact of the US,” he continues.

“This year it’s a common known fact the US will be short of avocado because Mexico is down on volume. They consume huge volumes per capita as a country and Mexico is a giant grower so they’re having a lower season and even though Peru is becoming a big player, Peru’s normal volume that goes into the U.S. is a very small percentage of the total.

“With Mexico down, they’re going to pay big money as the U.S. is a true market, it’s a market-based receiver.

“It’s not something anyone can control, Peru is late. But I think the real damage is going to come soon when the U.S. starts taking fruit and giving returns, that’s when a lot of the Peruvian volume will go in that direction.”

Peruvian export focus may 'swing' to North America

Despite the potential difficulties in the market, Cullum says Pacific will continue to operate as usual, but warns of a tough few months ahead and looking to the longer term he’s concerned what impact escalating avocado price tags can have on overall consumption, particularly in the U.K.

“Of course there is a limit to how much people will pay for an avocado which we all understand. My biggest fear is that we may have a situation where - if South Africa doesn’t have too much fruit, the US is starving for fruit," he says.

"Meanwhile consumption has been growing every year and we could hit a problem where we could damage that increase in consumption because once an avocado gets to a certain price, it’s like anything, it will hurt the consumption.

“And we’ve had such a good run, year after year of increases in avocado consumption. It’s been one of the real fruit and veg success stories and if we are not careful, we could have a problem by putting prices too high. And that’s not good, then people move onto something else. You put people off.”

Cullum says last year’s data shows the U.S. started to “open its doors” to avocado in around week 19 or 20 and so he expects the same this year.

“There are a couple more weeks where Peru is focusing on Europe in terms of its export and don’t get me wrong, Europe has in the past taken more volume that north America, but this year I think it will swing a bit.

“Because the numbers they are talking about already, well they’re too high. The issue we have in the U.K. is that Europe doesn’t necessarily think in the same way as us in the UK, they will just say the market is the market and start paying higher and higher.

“While the UK is all about long-term fixed pricing and that’s very difficult because as it gets harder and harder, they’re going to ask for more and more fruit and the reliable shippers from Peru will try to fill those gaps but at the same time, every container they send to the U.K. is essentially lost money.

“You have to look at it differently and look at the long-term - I see that this summer is going to be very complex for avocados.”

Cullum says he personally dislikes going back to the market base asking for “more and more money” because it doesn’t help the long-term positioning of the product.

“People say ‘your farm is going to make loads of money’, but I’m not happy about it, it’s not good because it’s not good for a product to be too expensive and you see it in all products, anything that crashes.

“Look at lime, for the last four weeks lime has been £9 or £10 a carton and this is ridiculously high. It’s a significant amount more than usual and what’s happened? Everyone has shipped limes from everywhere and it’s going to completely crash.

“It kills consumption and now people aren’t consuming so many because it’s too high and then all of the growers have sent product and the market is going to crash. Boom and bust is not good for the farm, it’s not good for anybody.”

Photo: www.shutterstock.com

www.freshfruitportal.com